Panel price movements in June reflect inventory pressure and the impact of the slow season
According to latest survey from TrendForce Corporation’s research division WitsView, market demand in 1Q10 was robust thanks to downstream customers’ aggressive restocking in preparation for LCD TV sales during Chinese New Year, as well as monitor panel customers‘ restocking in response to panel price increase. Yet, amid tight supply of several components, issues of short supply occurred.
Triggered by market expectations of another supply-demand imbalance in 3Q10, top-tier customers, as well as second- and third-tier customers have been procuring panels in 2Q
Supply and demand in the market was affected by preemptive strategic manipulation of the entire supply chain. It led to shorter cycles in industry fluctuations and higher uncertainty in price trends. Due to the expectation of panel tight supply in 3Q10, downstream customers are focusing largely on restocking in 2Q10. Meanwhile, amid the expectation of downtrend in panel prices, panel makers forecast that shipments will be better than expected in 2Q10. Yet, under such market development, industry players should adopt a more cautious attitude towards market fluctuations in 2H10. WitsView highlights the following key points:
1. In 1H10, retail sales of both TV and IT products were weaker than expected; hence, downstream set inventory began to increase, and panel makers’ cell panel inventory also rose gradually.
2. The combination of advance restocking in 2Q10 (for 3Q10) and previous inventory buildup is bound to slow down panel shipment momentum in 3Q10, unless end-market demand in 3Q10 exceeds supply, that is, total supply = available panel (current capacity + previously accumulated cell inventory + module inventory) + customers’ inventory on hand (set + panel) + channel inventory (set).
3. The European debt crisis will cut back consumers’ purchase momentum in the Euro zone and result in escalating cost of sales, making conditions unfavorable for local promotions. Based on the closing exchange rate of the Euro against the dollar, at 1.1966:1 on 4th June, 2010, the Euro has depreciated by as much as 20% from its
4. The tension between North and
5. In 2010, LED TV has become the star product in the sales of leading TV makers worldwide. Brand customers reduced their demand for CCFL-backlit panels, and consumers are awaiting the price cut of LED TV. Due to the different cost and limited LED panel supply, market share of leading brand vendors such as Samsung, LGE, Sharp, and Sony are expected to increase, backed by the internal support of their vertically integrated LED supply chain. On the hand, other brand vendors in the industry, including all six makers in
As several customers are still negotiating May panel prices with panel makers, panel price trends are still highly uncertain. Price forecasts for June are similar to that of May: ≦32W LCD TV panel prices will likely decline within $5, and that of >37W is forecast to slide by $5~10; monitor panel prices will fall by $3~5, while notebook prices are expected to dip between $2~3. (See figure 1)
Monitor Panel Price Update
Looking at worldwide top ten brand vendors’ shipments, average shipment between January and May (except for February with fewer working days) was approximately
Additionally, affected by the depreciation of the Euro, demand in
TV Panel Price Update
Although LCD TV inventory in China still needs to be cleared away, while the European debt crisis weakened demand from its retail market, demand for TV panels continued to be buttressed by leading global brand vendors’ restocking for 3Q10, which also supported TV panel prices. In particular, as Sony demonstrated its conviction of regaining their market share, the two Korean brand vendors, Samsung and LGE, did not take competition lightly.
On the other hand, market share of second- and third-tier brand vendors will likely shrink, impacted by high panel prices and leading brand vendors’ sharp price cuts in the retail market. TV panel prices in June are forecasted as follows: prices of mainstream panel sizes 26W, 32W and 37W will fluctuate within $3~5, while ≧40W panels are expected to slide by $5~10, similar to that of May. (See figure 3)
Notebook Panel Price Update
According to WitsView’s survey, despite the lower-than-expected monthly shipments between March and May, and the impact from European debt crisis, downstream customers still adopt an optimistic outlook toward demand during the hot season in 3Q10; they began to increase panel restocking in June, which limited price fluctuations. Prices in June are expected to hover between $2~3, with 10.1W, 13.3W and 17.3W having greater downside risk amid weaker demand. (See figure 4)
Conclusion
Preemptive strategic manipulations in the TFT-LCD industry gradually shortened the industry oversupply cycles and short supply cycles. Both buyers and sellers in the panel business seem to adopt the mechanism similar to trading in the futures market.
The trend of ‘dominant players continue to expand their dominance’ has become more evident in the industry. Hence, while industry players are optimistic toward demand during the hot season in 2H10, other possible variables in the market would still need to be clarified. Thereafter, industry players will be able to make the right strategic decisions and ensure appropriate risk control.
